Malayan Banking Berhad v. China Insurance Co Ltd

CACV000424/2002

CACV 424/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 424 OF 2002

(ON APPEAL FROM HCCT NO. 48 OF 1999)

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Coram: Hon Woo and Cheung JJA in Court

Date of Hearing: 3 June 2003

Date of Judgment: 10 June 2003

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J U D G M E N T

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Hon Woo JA (giving the judgment of the Court):

Introduction

1.This is an appeal from the decision of Burrell J on 10 September 2002 when he dealt with two summonses taken out by the defendant dated respectively 28 March 2002 and 4 April 2002.

2.The summons of 28 March 2002 sought the striking out of certain paragraphs of the re-amended statement of claim and also sought, under Order 14A of the Rules of the High Court, the court's determination of questions of law and construction ("the striking out summons"). The summons of 4 April 2002 sought an order to stay all proceedings in the action until the plaintiff amends the writs of summons and the pleadings by adding Overseas Union Bank Limited ("OUB") and Overseas-Chinese Banking Corporation Limited ("OCBC") as co-plaintiffs ("the joinder summons").

3.The striking out summons broadly sought to strike out the plaintiff's claim in respect of two matters, namely, the delay damages claim and the wasted expenditure claim. Prior to the hearing before the judge, the plaintiff abandoned the delay damages claim, and as a result, the parties and the judge focused on the wasted expenditure claim. The judge gave his decision on 10 September 2002 and made orders which, after correction under the slip rule, are as follows:

(1) No order to the paragraphs of the striking out summons insofar as the same refer to the delay damages claim.

(2) Save as in (1), the striking out summons be dismissed.

(3) The joinder summons be dismissed.

4.The question of costs on the two summonses was left to be agreed between the parties. However, no agreement was reached and the parties returned before the judge who made the following orders:

(4) The cost of the striking out summons and the joinder summons heard on 3 and 4 September 2002 be to the plaintiff save that:

(a) the cost of the striking out application up to and including 9 August 2002 be to the defendant; and

(b) any additional costs incurred under the heading costs thrown away arising out of the abandonment of the delay damages claim be to the defendant.

(5) Certificate for two counsel.

(6) No order as to the costs on the application for costs heard on 23 October 2002.

5.Against the orders in (1) to (4) above, the defendant now appeals.

Broad issues

6.Apart from appealing against costs, the appeal raises three broad issues:

(1) Whether the plaintiff's claim for wasted expenditure should be struck out under Order 18 rule 19 or the inherent jurisdiction of the court.

(2) Alternatively, whether the judge ought to have determined the question of construction under Order 14A and ruled accordingly.

(3) In the further alternative, whether the action is properly constituted without the joining of OUB and OCBC, and whether the action ought to be stayed pending such joinder.

Background facts as pleaded

7.The dispute between the parties arose out of a project to develop a site in Tong Mi Road, Kowloon ("the Site"). United Trump International Limited ("UTIL") purchased the Site with financial assistance from the plaintiff, OUB and OCBC. The loan amount was agreed at $332,500,000 for the Site and the construction cost for building a hotel on it. By an agreement dated 8 April 1997 ("the Development Agreement") made between UTIL and Molitoko Limited ("Molitoko"), Molitoko agreed to redevelop the Site and to construct a hotel on the Site for sum of $150,000,000. The defendant executed a Performance Bond dated 29 April 1997 ("the Bond") in favour of UTIL guaranteeing the due performance by Molitoko of the Development Agreement. The loan granted to UTIL by the plaintiff and the two other banks was secured, inter alia, by an assignment dated 8 April 1997 made between UTIL and the plaintiff whereby UTIL assigned and agreed to assign to the plaintiff all of the rights, title and interest in and all of the benefits and claims to them under the Development Agreement and the Bond. The defendant acknowledged the assignment in writing.

8.By its statement of claim, the current version being the re-re-amended statement of claim dated 31 October 2002 amended pursuant to the order of the judge dated 23 October 2002, the plaintiff alleges that because of breaches of the Development Agreement by Molitoko, it had exercised its right to terminate the Development Agreement pursuant to clause 24 thereof. It is also pleaded that the notice of termination was served on 20 March 1998 and that as Molitoko had at the expiry of 7 business days from the date of the notice still failed or wrongfully refused to attend to and rectify, remedy or mitigate the matters set out in the notice, the Development Agreement was automatically terminated. It is also pleaded (in paragraph 13) that

"notwithstanding termination of the Development Agreement, it was the intention of UTIL to resume works on the project by appointment of another contractor."

9.It is also pleaded that despite the termination, Molitoko wrongly and in breach of clause 24.4 of the Development Agreement refused to handover possession of the Site to UTIL. The plaintiff commenced proceedings against Molitoko and obtained an order for possession of the Site in High Court Proceedings HCMP 3774 of 1998. However the plaintiff was only able to obtain possession of the Site on 30 April 1999.

10.By a letter dated 19 May 1999, UTIL served on the defendant a notice of call on the Bond. By a letter dated 12 May 1999, the plaintiff served on the defendant a final written notification and demand under the Bond demanding payment of $30,000,000 (the limit of the Bond) to the plaintiff. It is pleaded in paragraph 15 of the re-re-amended statement of claim that the losses suffered by UTIL are wasted expenditure in the sum of $89,353,863.43.

11.The relevant provision of the Bond is as follows:

"If [Molitoko] shall duly perform and observe all the terms provisions ... of the [Development Agreement] on [Molitoko's] part to be performed and observed according to the true purport intent and meaning thereof or if on default by [Molitoko] the surety [the defendant] shall satisfy and discharge the damages sustained by [UTIL] thereby up to the amount of [$30m] ...."

The wasted expenditure

12.Mr Yu SC, on behalf of the defendant, stresses that the statement of claim is defective regarding the plea of wasted expenditure. He argues that a material averment of the plea, namely, the causation of the wasted expenditure, which is the only item of damages that remains pleaded in the statement of claim after the abandonment of the delay damages claim, is missing. The wasted expenditure as pleaded includes the interest on the loan that UTIL had to pay to the banks and the interest on the capital outlay of UTIL, together with the money wasted on the construction of the hotel before the Development Agreement was terminated and shortly after.

13.Mr Yu refers us to Chitty on Contracts, 28th Edition, para 27-024 for the proposition that causation is a necessary ingredient of a claim for damages for breach of contract. The paragraph states as follows:

"The important issue in remoteness of damage in the law of contract is whether a particular loss was within the reasonable contemplation of the parties, but causation must first be proved: there must be a causal connection between the defendant's breach of contract and the claimant's loss. The claimant may recover damages for a loss only where the breach of contract was the 'effective' or 'dominant' cause of that loss. The courts have avoided laying down any formal tests for causation: they have relied on common sense to guide decisions as to whether a breach of contract is a sufficiently substantial cause of the claimant's loss. ...."

14.Mr Yu complains that the standard form of pleading "by reason of the matters aforesaid" does not appear in the statement of claim to link the wasted expenditure plea to Molitoko's breaches complained of. He argues that as the plaintiff has had ample opportunity to remedy the defect, but failed to do so, it demonstrates clearly that the plaintiff is unwilling or unable to aver causation. The interest incurred for the loans from the banks had been incurred by UTIL because such loans were borrowed and they were borrowed for the purchase of the Site. Although there has been no plea that the project had been abandoned by reason of Molitoko's breaches, it is apparent from the statement of claim that the plaintiff has abandoned the project to build a hotel, because the plaintiff has abandoned its claim for damages arising from delay in the construction of the hotel or damages based on the liquidated damages provision in the Development Agreement, and because it claims wasted construction costs as part of the wasted expenditure.

15.On behalf of the plaintiff, Mr Tong SC submits that it is self-evident from the statement of claim that the project has been abandoned. However, he points out that the abandonment has not been pleaded because it is not what the plaintiff relies on in making the claim. What the plaintiff relies on is simply that there were breaches of the Development Agreement by Molitoko and the plaintiff has suffered loss and damage. He also submits that it is clear from the statement of claim that loss and damage flowed from Molitoko's breaches. Mr Tong draws our attention to the following matters to establish the causal connection between the wasted expenditure and the breaches of Molitoko:

(a) The Development Agreement was contractually scheduled for completion by Molitoko on 9 June 1999. If the bargain was adhered to, the plaintiff was to have a hotel on a turnkey basis on that day.

(b) Molitoko failed to carry out its obligations under the Development Agreement and it refused to hand over the Site to UTIL after the termination of the Development Agreement.

(c) By the time the plaintiff repossessed the Site on 30 April 1999, there was just over one month to the contractual completion date.

(d) The Site has remained undeveloped.

(e) The finance cost and the cost of construction incurred during the period from the date when such costs were incurred until the date of repossession had been completely wasted.

(f) Had Molitoko performed its part of the bargain, such costs would simply be part of the cost for having a hotel.

16.Mr Tong also relies on Chitty on Contracts, para 27-059 to submit that the court assumes profitability in favour of the innocent party and it is for the wrongdoer to prove otherwise.

17.On the complaint that the words "by reason of the matters aforesaid, the plaintiff has suffered loss and damage" are not in the statement of claim, Mr Tong submits that these words were never there from Day 1 and the defendant pleaded to the statement of claim without objection from May 1999 to January 2002. Mr Tong submits that if necessary, these words can be added by way of an amendment, and this on its own does not justify a striking out.

18.In our view, the way in which the statement of claim is pleaded shows clearly that the plaintiff alleges that the loss and damage by way of wasted expenditure were caused by Molitoko's breaches of the Development Agreement, although the normal practice of using the words "by reason of the matters aforesaid" has not been adopted. We do not think that the absence of these words, if it is the crux of the complaint, justifies an application to strike out and, for that matter, an appeal against a refusal to strike out.

19.The crux is, however, not the form of the wording used in the statement of claim, but rather that there can be no causal link between Molitoko's alleged breaches and the alleged wasted expenditure. It will be noted that although it is not disputed by Mr Tong that that the hotel project has not been proceeded with, nonetheless in the statement of claim, no specific timing is mentioned regarding the intention on the part of UTIL to abandon the project. On the contrary, it is pleaded in paragraph 13 of the statement of claim that "it was the intention of UTIL to resume work on the project by appointment of another contractor." It is also pleaded in paragraph 11 of the re-re-re-amended reply that UTIL appointed the architect and Chun Wo (the foundation contractor) to continue with the hotel development on 4 June 1998. The intention to abandon the project, if at all, must have come later, but as to when, it is not pleaded by the plaintiff. Mr Tong emphasises that it is not the plaintiff's case that the abandonment has anything to do with its loss and damage. As far as the plaintiff is concerned, its position is simply that Molitoko breached the Development Agreement, resulting in loss and damage to the plaintiff. It is for the plaintiff to elect the basis as to how it claims and seeks to prove the damages. If the defendant states that it was the abandonment that caused the loss and damage, it is a matter for the defendant to prove and it cannot be a matter for striking out.

20.We agree. In Anglia Television Ltd v Reed [1972] 1 QB 60, where an actor who had contracted with the plaintiffs to play the leading man's part in a television play which they were producing later repudiated the contract, and the plaintiffs could not get a substitute for the part and abandoned the production of the film, the Court of Appeal held that the plaintiffs were entitled to recover against the actor for their wasted expenditure that had been incurred before and after the contract. At pp 63H-64F, Lord Denning MR said:

"... It seems to me that a plaintiff in such a case as this has an election: he can either claim for loss of profits; or for his wasted expenditure. But he must elect between them. He cannot claim both. If he has not suffered any loss of profits - or if he cannot prove what his profits would have been - he can claim in the alternative the expenditure which has been thrown away, that is, wasted, by reason of the breach. ...

If the plaintiff claims the wasted expenditure, he is not limited to the expenditure incurred after the contract was concluded. He can claim also the expenditure incurred before the contract, provided that it was such as would reasonably be in the contemplation of the parties as likely to be wasted if the contract was broken. ... the correct principle [is] ... that wasted expenditure can be recovered when it is wasted by reason of the defendant's breach of contract. It is true that, if the defendant had never entered into the contract, he would not be liable, and the expenditure would have been incurred by the plaintiff without redress; but, the defendant having made his contract and broken it, it does not lie in his mouth to say that he is not liable, when it was because of his breach that the expenditure has been wasted."

21.Taking into account the principle stated in Anglia Television, Mr Yu's main argument is reduced into this: It was because of the abandonment of the project by UTIL that the claimed loss and damage by way of wasted interest on the bank loan and its own capital outlay was caused by the abandonment and not by Molitoko's breaches. We are not persuaded that this must be an inevitable conclusion or that this can be decided without a proper trial for the court to hear the evidence from the parties.

22.We also attempt to look at the issue from another angle. Assuming that Molitoko was guilty of breaches of the Development Agreement, as pleaded by the plaintiff, there could be two courses open to the plaintiff. One was to complete the project and the other was to abandon it. Whether either course with consequential loss was within the contemplation of UTIL and Molitoko is a matter for evidence and for trial. It cannot be a ground for striking out. Similarly, whether one of the courses adopted by the plaintiff would amount to a failure to mitigate damage would also be a matter of evidence and trial. If the plaintiff chose to complete the project, Molitoko's breaches would have caused a delay in the completion of the hotel with consequential damages such as increased construction costs (if any), damages for the delay in having the hotel, if operated as such to produce an income, or alternatively to sell it as a hotel (as opposed to selling a plot of land). If UTIL chose to abandon the project, the interest on the loan and on its own capital outlay would all be wasted and the construction costs incurred before the abandonment also wasted. Mr Yu argues that UTIL would have incurred the interest on the loan and on the capital outlay in any event, which interest could therefore not have been caused by Molitoko's breaches. We do not agree. Had Molitoko fulfilled its obligations under the Development Agreement, the plaintiff would, as scheduled in the Development Agreement, have a hotel in June 1999. But as pleaded in the statement of claim, Molitoko breached its obligations under the Development Agreement that caused the termination of it by the plaintiff in March 1998 and the plaintiff was unable to repossess the Site until the end of April 1999. This gave rise to the two courses of action that UTIL might take, which would not have been opened to UTIL had there been no breach.

23.In paragraph 19 of his judgment, the judge said:

"The test to be applied in a striking out application is to decide if the claim is uncontestably bad or is bound to fail. A claim for wasted expenses is not, of itself, bad in law.

' Sometimes, however, the plaintiff may be compelled by circumstances to frame his suit on a different basis as to damages, not on the basis of the loss of his bargain but on the basis of his out-of-pocket loss. In other words he is claiming not to be put into the position he would have been in had the contract been performed, but to be put into the position he would have been in had it never been made, which is a normal measure of damages akin to that in tort. In such cases expenses incurred in preparation or in part performance will be properly recoverable and will not involve an inconsistency of compensation.'

(McGregor on Damages, 16th edition)"

24.The judge also dealt with the argument that the claimed losses would have arisen by reason of the project being abandoned and not because of Molitoko's breaches. He said that it was a matter of fact for the defence to prove.

25.We agree. Whether it was the abandonment, independent of Molitoko's breaches, that caused UTIL's wasted expenditure or otherwise it is, in our judgment, a matter for trial, which in the present circumstances of this case does not justify a striking out.

The Order 14A application

26.The issue that the defendant sought the court's determination, as set out in striking out summons, is:

"Whether, on the true construction of clause 24 of the said Development Agreement, the rights of United Trump International Limited following a valid termination of the Development Agreement are exclusively those provided for under Clause 24 and are limited to the recovery of additional costs (if any) of completing the Works following such termination ..."

27.The judge first identified the proper approach to an Order 14A application. He said:

"6. The court's approach to such an application has been recently summarised by Ma J in Rockwin Enterprizes Ltd v. Shui Yee Ltd & others [2001] HKEC 1102. It involves a three step approach as follows :

'(1) is the relevant question one of law or construction?

(2) if so, is that question one that should be determined under the O.14A procedure? This step throws up three requirements:

(a) the court must have all necessary facts and matters before it in order to determine the question;

(b) if determined by the court, the question will finally determine the entire cause or matter or any issue or claim therein;

(c) the court must in its discretion be satisfied that the question is one that ought to be determined under O.14A; and

(3) if "yes" to both steps above, what is the determination of the question and what orders should be made in consequence?'"

28.The judge refused to exercise his discretion because he did not consider that he had all the material facts and matters before him required for determining the question and that he was not satisfied that it was a question that is suitable for determination under Order 14A. He elaborated:

"13. I accept the plaintiff's submission that the question posed is not a question of pure law or construction. Whether or not the plaintiff is entitled to the damages it claims as a result of a termination under clause 24 is, in my judgment, likely to or may depend on findings of fact. Before a court can safely answer that question there would have to be, at least, some investigation into the circumstances of the termination. The plaintiff does not accept that at the time of the termination the project was being abandoned, which is at the heart of the defendant's submission. The issue of 'abandonment' has been raised in the defence. The defence rely on it and to that extent there is a burden on them to prove it."

29.Clause 24 of the Development Agreement provides as follows:

24.1 Without prejudice to any of its rights or remedies, the Owner may by notice to the Developer, which notice shall not be given unreasonably or vexatiously, terminate this Agreement if the Developer shall have committed any one or more of the following defaults, viz:-

a) without reasonable cause, wholly or substantially suspending the carrying out of any part of the Works before the Completion Date;

b) failure to proceed regularly and diligently with the Works or without reasonable cause grossly deviating from or not following the phases of work set out in the Time Schedule;

c) wrongful refusal or persistent neglect in complying with lawful requirement of the Architect and/or the Owner materially affecting any aspect of the Works, its progress or quality;

d) failure to comply with the provisions of Clause 25; or

e) failure to take out or maintain the performance bond required of the Developer by Clause 21.

then, the Owner (or the Architect if the Owner chooses so to instruct) may give the Developer written notice of its intention to serve notice of termination under Sub-clause 24.2. The Owner's notice of intention under this Sub-clause 24.1 shall specify the default in question and call upon the Developer to stop, not to continue with or repeat or, if possible, to rectify such default within 21 Business Days or such further period of time as the Owner may specify in its notice of intention to serve notice of termination. Should the Developer, after receipt of the Owner's notice of intention to serve under this Sub-clause 24.1, ignore such notice or without good reason refuse to stop or fail to rectify the default complained of it or continue with the default therein complained within the period of time specified in such notice, or wrongfully at any time thereafter repeat such default (whether previously repeated or not), then the Owner (without prejudice to any other rights or remedies it may have) may within 7 Business Days after such failure, refusal continuance or repetition by notice pursuant to Sub-clause 24.2 terminate this Agreement.

24.2 Notice of termination shall be given in writing and, once given, shall be irrevocable. Such notice shall specify the default complained of the Developer and call upon the Developer to remedy, rectify or mitigate the default therein complained within 7 Business Days from the date of the notice. If the Developer still refuses or fails to comply with the Owner's demand under the notice within time, then the notice shall take immediate effect on its expiry and this Agreement wholly terminated if by the expiration of the period, the Developer stil1 fails or wrongfully refuses to attend to and rectify, remedy or mitigate the matter therein complained.

24.3 ...

24.4 In the event of termination of this Agreement as aforesaid (and not re-instated), no further payment of the Price is to be made and the Owner shall be entitled to employ such other person (or if the Owner so elects, continue to employ the Architect, Building Professionals, and contractors/sub-contractors previously engaged by the Developer) to carry out and complete the Works. The Owner shall be entitled to forthwith enter the Site and use all temporary buildings, plants, tools, equipment, materials and goods intended for the Works and may purchase such other materials and goods necessary for the taking over and completion of the Works until the Hotel is put to fully operational status.

24.5 ...

24.6 On termination as aforesaid, the Developer shall allow and pay to the Owner the amount of any direct loss and/or damage caused to the Owner in such circumstances, including, without limitation, liquidated damages under Clause 18 if due to such termination, the Works has to be completed beyond the Completion Period.

24.7 Until after the completion of the Works under Sub-clause 24.4, the Owner shall not be bound by any provisions of this Agreement to make any further payment for the Price to the Developer. Upon such completion and upon verification within reasonable time of the accounts therefor, the Architect shall certify the amount of expenses properly incurred by the Owner and the amount of any direct loss and damage (including liquidated damage) caused to the Owner by the termination. ... (emphasis added)

30.It is to be noted that the right of termination by UTIL is according to the first phrase of clause 24.1 to be "without prejudice to any of its rights or remedies". It is also repeated in the body of clause 24.1 that "the owner (without prejudice to any other rights or remedies it may have) may within 7 Business Days after such failure, refusal continuance or repetition by notice pursuant to Sub-clause 24.2 terminate this Agreement". Clause 24.6 also uses the word "including" (as highlighted above).

31.From the highlighted provisions of clause 24, it appears to us that at least it is arguable that the damages recoverable following a valid termination of the Development Agreement are not necessarily those exclusively provided for under that clause or limited to the recovery of additional costs (if any) of completing the works and loss caused by the delay in completion following such termination, as contested by the defendant. Where the issue posed by the defendant's Order 14A application is not definitely capable of being resolved in its favour, the determination of the question will not finally dispose of the plaintiff's entire cause of action or claim. This alone would have justified the judge's refusal to accede to the application. We agree with the judge that the proper determination of the issue might involve findings of fact in the context of the matrix of facts that are normally necessary for determining the proper construction of a contractual term, such as clause 24.

32.Mr Yu complains that if the damages claimed are not based on clause 24, then there is an absence of a plea, independent of clause 24, that Molitoko's breaches amounted to a repudiation which was accepted by UTIL. However, in our judgment, the underlying material facts have been pleaded by the plaintiff for making such a claim, and the absence of an express plea on repudiation does not, in the circumstances of this case, justify a contention that the judge was wrong in refusing to determine the issue sought to be determined pursuant to Order 14A.

Joinder of plaintiffs

33.Mr Yu's refers us to the general rule that a party cannot appoint an agent to sue in the name of the agent. He submits that the judge was wrong to refuse the joinder summons since Order 15, rule 12 of the RHC should not be applied to the present case because the representative plaintiffs procedure is intended to apply where there are numerous parties who have the same interest in the action. In this action, there are only three banks who have an interest in suing the defendant on the Bond. There are not "great in number" and should not be allowed by the court to use the plaintiff as the agent for them to act as the sole plaintiff in this action. Mr Yu stresses that since the two lending banks apart from plaintiff are not parties, they cannot be ordered to make discovery of documents (see Ventouris v Mountain [1990] 1 WLR 1370), especially documents relevant to the defence under paragraphs 10-12 and 23A of the re-re-re-amended defence, which is that the termination of the Development Agreement was not caused by Molitoko's breaches but that UTIL had decided to abandon the project because it could not obtain further loans for the construction of the hotel from the banks.

34.The judge gave a number of reasons for dismissing the defendant's application for joinder of the two banks. He said:

"23. The defence take no issue with [the plaintiff's] contractual right to represent the co-lenders. However they invite the court to exercise its residual discretion not to let the case proceed in its present form. In my judgment there are several reasons why this discretion should not be exercised.

(1) I am satisfied that the action has been properly constituted under O.15 r.12 as a representative action. The Hong Kong White Book states :

' The rule as to representative proceedings should be treated as being not a rigid matter of principle but a flexible tool of convenience in the administration of justice, and should be applied, not in any strict or rigorous sense, but according to its wide and permissive scope.'

Thus, representative actions are not solely for cases where there are numerous plaintiffs.

(2) The defence contention that under O.15 r.4(2) that where persons are jointly entitled to relief they should all be joined as parties is not applicable to this case. The syndicated loan agreement makes the banks' rights and obligations several not joint.

(3) The original Statement of Claim was served in May 1999. The fact that approximately three years have passed before this application is first made is a factor against exercising the discretion.

(4) A discretion should not be exercised without good reason. In this application the defence advance two main reasons neither of which are compelling.

(5) The first reason is described as a 'continuing concern' over discovery and 'a wish to probe ... with each of the three banks'. The defence describe it as a 'wish to probe', the plaintiff submits it is in fact a fishing exercise into the documents of a non-party. Part of the defence case is that the termination of Molitoko was vexatious. If so, it was UTIL which acted vexatiously and not the lending bank or banks. The plaintiff's discovery obligations have been discharged. I do not regard the defence's non-specific 'concern' as a sufficient reason to create two extra plaintiffs.

(6) The second reason is the defendant's 'concern' over costs should they successfully defend the claim. This reason is without merit. Maybank is the largest Bank in Malaysia. Moreover it is a foreign plaintiff and there has been no application for security for costs.

(7) The Bond upon which the plaintiff sues has been assigned solely to the plaintiff, not all three banks. Maybank also has an 'irrevocable' authority to sue alone as a representative of all three banks.

(8) By virtue of O.15 r.12(3) a judgment against the plaintiff is binding on all the parties it represents."

35.We must say that while the judge has stated a number of reasons for his refusal to exercise his discretion under O 15, r 12(1) to order a joinder of the OUB and OCBC, there is merit in Mr Yu's point that the rule is generally applicable only where "numerous" persons having the same interest in suing are involved. There are only three banks here. It is hard to see why they should be allowed to be represented by only one of them, contrary to the normal rule that an agent cannot sue in his own name (see Jones v Gurney [1913] WN 72).

36.The fact that the assignment of the project and the Bond was in favour of the plaintiff alone and the defendant's acknowledgement of it should not be treated as a ground for justifying the two other lending banks being joined as plaintiffs, because the assignment was made to the plaintiff as an agent for itself and the two other banks as lenders, and the defendant's acknowledgment of the assignment does not mean that it had agreed that the plaintiff can sue as an agent.

37.Nor should the lateness of the application militate against granting it. It is apparent that it was when the defendant was not satisfied with the discovery only by the plaintiff and not by the two other banks that eventuated the application.

38.In Chinavest II-A, LP v Chan Leung UN Roy [1998] 4 HKC 453, the plaintiff and a number of companies claimed against the defendant for breach of contract to sell shares and obtained O 14 judgment against the defendant for his failure to pay the sums due. The defendant appealed. The Court of Appeal, while dismissing the appeal against the judgment, ordered all the sellers to be joined as plaintiffs in the action. Godfrey JA said at 459E-F:

"The number of sellers is not in any real sense numerous; but apparently, all the sellers are content that the action should have been brought by the plaintiff as one of the sellers representing them all. Mr Whitehead confirms that all the sellers are behind the plaintiff in its prosecution of this action against the defendant.

In the circumstances, I am of the opinion that this action is properly constituted, but I would order, as this court has power to do, that all the sellers be added as plaintiffs in the proceedings. I do not think it satisfactory to leave this as a representative action, when a number of the sellers are incorporated in various places outside the jurisdiction."

39.While the judge in the present case apparently did not accept that the fact that OUB and OCBC are companies incorporated overseas being sufficient for him to order joinder, we consider that there is justification for Mr Yu's complain that without these two banks being actual plaintiffs, no discovery can be ordered against them (Ventouris v Mountain), and thus an unfair disadvantage towards the defendant has resulted. Mr Yu has drawn our attention to the defence that the termination of the Development Agreement by UTIL was unreasonable and vexatious, and that there are documents showing that these two banks were actively involved in decisions relating to the loan, and thus it is not unlikely that these two banks have documents that may assist the defendant in proving its defence. Mr Tong, on the other hand, refers us to a letter from the plaintiff's solicitors stating that there were no documents relevant to the issues in this action that were with the two banks. However, this statement is not in the form of an affidavit and one cannot be sure that the solicitors had the authorisation of the two banks to make the statement. The defendant is not bound to accept the statement as true.

40.We consider that although the defendant is not able to point to any specific documents that OUB and OCBC may disclose on discovery, yet discovery to be made by a party is a matter of course in the normal course of a litigation, and there is no sufficient reason or justification, because the plaintiff has chosen to represent itself and the two other banks, for the defendant to be deprived of such a benefit which should be available to contesting parties in normal civil litigation.

41.In the circumstances, we consider that the judge was wrong in refusing to grant the joinder summons.

Costs

42.The appeal also attacks the judge's orders as to costs. On the costs orders, Mr Yu merely relies on the reasons set out in the notice of appeal which consists of two grounds against the costs order made by the judge. One is that the defendant's application under the striking out summons was substantially successful and had forced and/or would have forced the plaintiff to amend its pleadings further. The judge thus erred in not awarding the defendant all its costs in connection therewith. The second ground is that the judge erred in ordering that the defendant should only be permitted to recover its costs in relation to its striking out summons up to 9 August 2002. The basis of this ground is that the plaintiff by its Calderbank offer only offered to pay the costs of that summons up to 9 August 2002. It did not offer to pay costs thrown away arising out of the delay damages claim and/or abandonment thereof, and that it did not concede that its pleadings require further amendment above and beyond the deletion of the delay damages claim. The defendant was accordingly justified in proceeding with the striking out summons, and the judge erred in depriving the defendant of its costs and in ordering it to pay the plaintiff costs of so doing.

43.It is trite that costs are within the sole discretion of the judge. The judge had heard the parties for two days before he reached his decision on 10 September 2002. Counsel for the plaintiff had told the judge right at the beginning that the delay damages claim was abandoned. As is apparent from the judge's decision, he only dealt with the wasted expenditure claim. On that, the defendant had argued and lost. The judge did not award the entirety of the costs against the defendant for this failed summons. He has ordered costs in favour of the defendant up to 9 August 2002 and also the "additional costs thrown away arising out of the abandonment of the delay damages claim". We are not persuaded that the judge was plainly wrong in the exercise of his discretion. We are not disposed to interfere.

Conclusion

44.For the above reasons, we allow the appeal relating to the joinder summons. We set aside the order made by the judge dismissing that summons, and make an order that until the OUB and OCBC are joined as plaintiffs in this action, the action be stayed. Apart from that, the rest of the appeal is dismissed.

45.Since the defendant is partially successful with the appeal, we make the following order nisi as to costs, having taken into account the amount of time employed by the parties in dealing with the various issues before us:

(a) The defendant is to have one-quarter of the costs of the appeal;

(b) The plaintiff is to have three-quarters of the costs of the appeal;

(c) The defendant is to have the costs of the joinder summons below; and

(d) The costs order of the judge on the striking out summons is affirmed.

Representation:

Mr Ronny Tong SC and Mr Anthony Chan SC, on the instructions of Messrs Simmons & Simmons, for the plaintiff

Mr Benjamin Yu SC, on the instructions of Messrs Masons, for the defendant